Agric value chains key amid forex challenges

For sector players that have looked at foreign markets for expansion and access to foreign currency, they have been discouraged by high foreign currency retention rates on exports.

Government will prioritise strengthening of agriculture value chains as a way of mitigating challenges that the agro-processing sector is facing, a senior government official has said.

The agriculture sector provides over 60 percent of raw materials as throughput into manufacturing sector, while on the other hand, the manufacturing sector provides inputs to the agriculture sector in the form of fertilisers, chemicals and implements.

However, over the years, local linkages have been lagging behind national demand resulting in the importation of raw materials for agro-processing.

Some of the challenges the sector has been facing emanate from foreign currency shortages and delays in disbursements, affecting raw material supply and capital investment initiatives.

Banks have also not come to the party to provide long term finance and in cases where they do, the cost of borrowing would be too high.

For sector players that have looked at foreign markets for expansion and access to foreign currency, they have been discouraged by high foreign currency retention rates on exports.

All the country’s exporters, including those in the agriculture value chain, surrender 40 percent of their foreign currency earnings in exchange for local Zimbabwe dollars at the official exchange rate.

This mandatory obligation is seen by most exporters as a threat to their viability.

However, government, through the Ministry of Industry and Commerce is considering other ways of intervention.

The interventions efforts are meant to support and promote the development, growth and competitiveness of the agro-processing sector.

In her presentation at the Agro Processing Business Forum held last week, Minister of Industry and Commerce Dr Sekai Nzenza, said in light of the challenges mentioned above, Government prioritized strengthening of agricultural value chains for crops such as soya bean, cotton, sugar, dairy, as well as the leather and fertiliser value chains.

On the soya bean value chain, Minister Nzenza said inadequate soya bean throughput has resulted in over reliance on imported soya bean.

This is in addition to other challenges such as limited and delayed access to foreign currency to import soya bean; as well as short term and high cost of lines of credit.

As an intervention measure, Minister Nzenza said government will give incentives for private sector to enter into contract farming arrangements with farmers to increase soya bean production.

“The Ministry and Reserve Bank of Zimbabwe are engaging to reduce cost of borrowing money and improving foreign currency availability,” she added.

Minister Nzenza also said delays in accessing foreign currency to import ammonia gas had resulted in Idle capacity in the fertiliser value chain. The industry which has a capacity to produce 90,000 mt of ammonium nitrate is only doing 30,000 mt. In terms of phosphate compounds, the industry has a capacity to produce 80 000mt but is only doing 60,000mt.

Minister Nzenza said plans are to grow production of ammonium nitrate to 240 000mt by 2023, and to do that government will recapitalise fertiliser manufacturing companies as well as invest in new fertiliser manufacturing technologies.

Plans are also to increasing the uptake of locally manufactured fertiliser by Government. In the cotton value chain, that is characterised by inadequate cotton throughput; low quality of cotton as high grades are exported; lack of state-of-the-art spinning and weaving equipment; as well as high cost of utilities, Minister Nzenza said the plan is to adopt new variety of cotton seed to improve yields.

She added that government would also encourage investment in state-of-the-art spinning and weaving equipment that can weave fabrics like poly cotton in line with fashion trends.

Strengthen anti-dumping measures to reduce the influx of second hand clothes is also being considered.

While Minister Nzenza also touched on other value chains such as the dairy and leather sector value chains, ultimately she said the key success factor is strengthening collaboration between Government and all stakeholders in the value chains.

“Innovative policy suggestions that improve the ease of doing business, productivity and competitiveness of our productive sectors are welcome,” she said.-ebusinessweekly.c.zw